[Pen-l] Why WTO talks collapsed

[ravi <ravi@xxxxxxxxxxxxxxx>]

http://thestar.com.my/columnists/story.asp?col=globaltrends&file=/2008/8/4/columnists/globaltrends/21996050&sec=Global%20Trends

Why WTO talks collapsed
GLOBAL TRENDS
By MARTIN KHOR

In the most widespread view, the United States did not want to face  
the cotton issue to protect the wealth of a few thousand cotton farms.

AFTER the collapse of the World Trade Organisation’s mini-Ministerial  
talks in Geneva, government officials and the Secretariat are picking  
up the pieces so as to save the Doha negotiations or at least salvage  
some parts of it.

They are still recovering from the shock of the breakdown of the talks  
that took place on July 29 after a roller-coaster nine days.

Many delegates expressed regret at the failure. Malaysia’s  
representative to the WTO Ambassador Muhamad Noor Yacob said he was  
disappointed because it meant an opportunity lost for reducing the  
developed countries’ agricultural subsidies, and also because Malaysia  
would have had more export opportunities if the tariffs were reduced.

Although some 40 ministers were invited to the talks, most of the  
negotiations were conducted by only seven ministers (from the United  
States, European Commission, India, Brazil, China, Australia and  
Japan) plus WTO Director General Pascal Lamy.

Progress had been made on a number of issues, but on several of the  
key issues the talks had been stuck. A compromise draft by Lamy to the  
G7 had a fragile status, with India and China not agreeing to  
important parts of it.

Meanwhile, frustration was building up among the 30 or more non-G7  
Ministers who were specially invited by Lamy to the WTO, only to find  
themselves waiting for days on the wayside, while the G7 met.

When the end came, the United States and others pinpointed Special  
Safeguard Mechanism (SSM) as the sticking point of the entire  
negotiations. Most developing countries wanted this mechanism to  
protect their farmers from sudden surges of agricultural imports.

The SSM would allow them to raise tariffs above the bound rate if  
import prices of agricultural products fall below or the volume rises  
above certain levels.

The US Trade Representative Susan Schwab tried to take the high ground  
by proclaiming that it was preserving the past 30 years’ gains of the  
trading system from the protectionists led by India and China whom it  
accused of wanting to raise their tariffs.

It was part of a concerted attempt by the US to shift the blame of any  
collapse onto India and China, by portraying them as selfishly seeking  
new protectionist devices. In fact a strong SSM had the support of  
about a hundred developing countries.

Insiders at the G7 meeting were surprised at the tenacity of Schwab in  
insisting on an unreasonably high trigger of 150% (of the base import  
volume) before the SSM could be allowed to raise duties above the  
bound levels prevailing now.

Lamy tried to break the SSM deadlock by proposing a new draft, but  
this was rejected by the United States. On Tuesday morning, officials  
of the G7 laboured to produce an alternative SSM model, which they  
presented to their ministers. Schwab again rejected the new draft, and  
this sank the talks.

Many ministers and diplomats are speculating that the SSM was not the  
real issue that was irreconcilable. In the most widespread view, the  
United States really did not want to face the cotton issue, which was  
next on the agenda once SSM was settled.

Since the United States had agreed to cut its overall trade distorting  
farm subsidies by 70%, it would have to reduce cotton subsidies by  
more than that as it had been agreed that cotton subsidies be cut more  
deeply than the average rate.

The 2008 US Farm Bill having planned that cotton subsidies be  
maintained or increased in the next five years, it would have been  
difficult or impossible for Schwab to offer a plus 70% cotton subsidy  
cut.

Without a good cut in subsidies, US cotton would continue to be sold  
at artificially cheap prices, thus depressing the trade and income of  
poor African cotton growers.

The failure of the WTO talks would then have been placed squarely on  
the United States, and it would have been seen as a villain protecting  
the wealth of a few thousand cotton farms while millions of African  
cotton farmers would continue to languish in poverty.

This suspicion that the United States wanted to avoid the cotton  
embarrassment is the backdrop to the comments made by several  
ministers of developing countries in their press conferences that SSM  
could not have been the real cause of the talks breaking down, but  
rather the scapegoat picked on by a major player to shift the blame on  
to another issue and on other countries.

After all, despite Schwab’s portrayal of the protectionist potential  
of the SSM, the United States itself is a frequent user of safeguards.  
It was a case of the pot calling the kettle (or rather the potential  
future kettle, since the SSM does not even exist yet) black.

As Indonesian Trade Minister Mari Pangestu, who led the fight for the  
SSM, put it: “It is like accusing us of a crime that we did not commit.”

As the dust settles, the diplomats and secretariat officials remaining  
in Geneva are pondering over the next steps.

What will happen when the WTO comes back from its August break? No one  
can tell. The speculation is that some meetings will continue. But the  
spirit is gone from the talks, because the United States will be  
preoccupied with its Presidential elections.

The expectation is that nothing can happen until the new US President  
and the new Congress settle in next year. By then there may also be a  
change in government and trade minister in other countries as well.

It could be difficult for the WTO talks to re-start on the same basis  
as before, and they could just fade away. But the WTO and its on-off  
talks have been resilient in the past. Who knows, the off button may  
switch to “on” again one day.


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